The EFTA/EEA Solution to the Current BREXIT Impasse

Implications of current Brexit negotiations failing

Mrs May’s government, without any practical Brexit plan, has created a mess and time is running out. Without a practical solution to the soft border in Ireland there can be no transition deal and, therefore, no withdrawal agreement.   Without one, the UK would leave the European Union (EU) on 29th March 2019 with no arrangements in place to continue trading with the Single Market (Internal Market or wider European Economic Area, EEA).  Such a situation (often called ‘falling off a cliff edge’) would be hugely disruptive to the existing highly integrated trade with the EEA and would impact the wider UK economy.

Government Proposals lead to Brexit in Name Only

However, should the government succeed in getting the EU to accept its proposed solution(s) to the Irish border and to wider trade with the EU, the outcome is likely to be Brexit in name only. Worse, the UK would become firstly a powerless temporary vassal state and then a permanent one under increasingly arduous EU imposed conditions, such as sacrificing the UK fishing industry, surrendering UK defence and defence procurement to the EU, paying substantial amounts into the EU budget, accepting a continuation of free movement (uncontrolled EU immigration, with extra rights for EU citizens), unconditional compliance with all existing and future EU laws, remaining under the EU’s European Court of Justice (ECJ).

Mrs May’s approach to Brexit is the Problem

Yet this unwanted situation is of Mrs May’s making by her seriously reckless decision, first mentioned in her Lancaster House speech, 17th January 2017, to leave the Single Market on Brexit day. Whilst leaving may be desirable in the long term, it is hardly practical now and her proposed solutions of mutual recognition of standards and a free trade agreement look increasingly unrealistic and counter-productive.  Her wishful thinking, dithering and failure to understand how the EU and EEA works, have only made matters worse.

A simple EFTA/EEA Solution to Mrs May’s Brexit Problems

Many of the problems Mrs May has created can be solved by remaining within the Single Market (even temporarily) via a different, more flexible route.  Such a route is available if we re-join The European Free Trade Association, EFTA, assuming they would have us back.  Whilst this cannot be taken for granted, it would be advantageous to the existing EFTA/EEA countries (Norway, Iceland, Liechtenstein – Switzerland is outside the EEA) giving the overall grouping greater robustness.  The EU has hinted that it could accept this as an option to achieve an orderly Brexit.

Criticisms of EFTA/EEA (aka The Norway Option) can often be resolved through research using original or reputable sources via the internet (e.g. here).  However, there will always remain the opportunity for the EFTA/EEA option or any other suggestions to be misrepresented by the unscrupulous or ignorant.

EFTA is a Trading Association without political aspirations

Originally set up by, among various countries, the UK, EFTA is not a stepping stone to EU membership or even to associate membership of the EU. EFTA existed before the creation of the Single Market. As its name suggests, it was  – and indeed is – purely a trading bloc. However, EFTA countries can participate in the Single Market on the basis of the EEA Agreement.

EEA Agreement is Flexible and Customisable

The basic EEA Agreement  is amended from time to time (through additional Annexes and Protocols) as it applies to each of the EFTA members. It is not a ‘one size fits all’ approach and is customised to fit each’s requirements.  Thus we could get a bespoke agreement by taking and amending the existing ‘off the self’ versions.

Control of EU Immigration into the UK

Article 112 (the Safeguard Measures) of the EEA Agreement provides a mechanism for the UK unilaterally to control immigration from the EU. Similar wording has already been copied by the EU into their draft Withdrawal Agreement (Article 13, Protocols relating to Northern Ireland) effectively allowing the EU unilaterally to limit immigration into the EU from the UK.

Agriculture and Fishing are outside the EEA

The EU’s Common Fisheries Policy and the Common Agricultural Policy are excluded from the EEA Agreement. We could therefore regain control of our Exclusive Economic Zone  next March without having to ask the EU.

Laws relevant to trade in the EEA

The EU acquis (or body of laws) relevant to trade comprises about 25% of the total EU acquis and in 90% of cases reportedly originates from higher (global) bodies.  We would need to comply anyway in order to trade elsewhere, unless we chose to leave organisations such as the World Trade Organisation.  The rest of the EU acquis does not apply unless we choose to adopt any which we could modify as required at a later date.

Almost  frictionless trade within the EEA

It is membership of the Single Market (or wider EEA) and not membership of a customs union that delivers nearly frictionless trade with the EU for countries like Norway. This is because each member is working to common standards and processes (harmonised) for product, production, market surveillance and conformity assessment under a centralised system of bureaucratic control by the EU.  The EU’s Guide to the implementation of directives based on the New Approach and the Global Approach explains what applies to many products.

External Border Controls protect the EEA

By contrast, accessing the EEA from outside its external borders involves complying with regulations, inspections and testing, processes and procedures, external tariffs, customs checks/clearance, VAT etc. intended for dealing with ‘third countries’.   These provisions, effectively border controls, also manage safety and other unacceptable risks to EEA members, consumers and enterprises involved with ‘imports’ and are sometimes protectionist.

There also need to be arrangements to control diseases and parasites etc. in imported livestock, products, plants, packaging etc. from ‘third’ countries.  According to EU law, products of animal origin (meat and meat products) imported into the EU must be inspected (sanitary checks) at Border Inspection Posts (BIPs). For products of plant origin (for plants and plant-derived foods) phytosanitary checks are required at Community Entry Points (CEPs, Designated Ports of Entry). It is a nightmare and this is what we would face next March if Mrs May persists in her stubbornness.

EEA Membership allows participation in critical trade related decision making

A mechanism exists for EFTA members to participate in shaping decisions by the EU, which is described here.  Unlike EU Member States, EFTA members also freely participate in global bodies helping to form standards and practices before these are passed down to the EU for implementation.

Free Trade Agreements

Both EFTA as a whole and individual EFTA countries are free to make their own trade agreements, unlike Member States of the EU or of its customs union.  EFTA countries do not operate common external tariffs.

EEA Membership is Free

For EFTA countries, EEA membership is effectively free although they do ‘voluntarily’ contribute to the specific agencies they participate in and to development grants. We could pick and choose.

Judicial Oversight of EFTA/EEA by the EFTA Court

The EFTA Court is independent of the ECJ although it can take into consideration or follow ECJ rulings. It does not take precedence over national courts enabling the UK, if we so choose, to ignore any of its judgments.  The European Commission could object but we could then ignore it too.

Quitting the EEA at any time

Article 127 of the EEA Agreement covers the process which involves giving 12 months’ notice.  Unlike leaving the EU, no payments and negotiations are required.

Further Information

The EFTA/EEA option and Brexit debate in general has often suffered from misunderstandings or errors and mischievous misrepresentation effectively inhibiting rational discussion.  The following are useful sources of research information: Brexit Reset, Eureferendum.com, various posts on Campaign for an Independent Britain and affiliates.  For consequences of a No Deal situation, see the EU’s Notices to Stakeholders under Brexit preparedness.

The Way Ahead to Independent Sovereign Nation Trading

The EFTA/EEA route could salvage the faltering Brexit process, at least as an interim measure. It would facilitate leaving the political, centralised, anti-democratic construct of the EU whilst still retaining (and expanding) almost frictionless trade.  It could also provide a springboard for a highly successful trading relationship for independent sovereign nations in Europe.

The continuing relevance of Article 127 of the EEA Agreement

By Professor George Yarrow

Last Thursday (29th March 2018) was the last day on which the Government could have given formal notification that it wished to withdraw from the European Economic Area Agreement (EEAA) on Brexit Day (29th March 2019), in accordance with Article 127 of the Agreement.  As it has consistently indicated was its intention, the Government did not send a notice of withdrawal to the other parties to the Agreement.  This raises the immediate question: how do things stand now?

The first thing to say is that the earlier situation has been changed somewhat by what appear to be mutually agreed provisions in the draft Withdrawal Agreement for a post-Brexit transition or standstill period.  Article 124(1) of that document stipulates that: “… during the transition period, the United Kingdom shall be bound by the obligations stemming from the international agreements concluded by the Union, or by Member States acting on its behalf, or by the Union and its Member States acting jointly.” Since the EEAA is one of those international agreements, it is clearly envisaged that UK will continue to be bound by it during the transition, subject only to the consent of Iceland, Liechtenstein and Norway.  That consent can be confidently expected, the EEAA being an existing free trade agreement with the UK, a major market for Iceland and Norway.

If the draft Withdrawal Agreement, inclusive of Article 124(1), is eventually ratified, there will be no concurrent UK withdrawal from the EEA on Brexit day.  The UK will remain an EEA participant throughout the transition period and the deadline for the notification of any future withdrawal will be put back until 31st December 2019, one year ahead of the projected end of the transition.  By then the prospects for success in achieving the kind of longer-term settlement sought by the Government (whatever that might turn out to look like) will be clearer.  And at that stage the Article 127 issues will need to be faced again, albeit in different circumstances.

The ‘change in circumstances’ point is important here. It is to be recalled that the Government’s view so far has been that the EEA Agreement would automatically cease to be applicable to the UK upon withdrawal from the Treaty of Lisbon. I have argued since June 2016 that this view is wrong: there is no text in either Treaty which says as much and the view is only sustained by speculative interpolations that run counter to norms of international law.

More specifically, the Government has repeatedly asserted that the EEAA becomes automatically inapplicable on Brexit Day, either because the UK will not be a member of EFTA or because it will not be a member of the EU.  That is, it has been (wrongly) claimed that membership of one or other of these two institutions is a necessary condition for EEA participation.  The reasoning behind this view has never been aired publicly, nor has the claimed legal advice on which it is allegedly based ever been disclosed. This has, I think, been a deliberate strategy to avoid Parliamentary scrutiny, by keeping under wraps facts and reasoning that could pose problems for Conservative party management. It was likely judged that achieving majority support in Parliament for voluntary withdrawal from the EEAA would be difficult.

The contrived ‘justifications’ of automaticity are now being put to the test. Article 124(1) of the draft Withdrawal Agreement indicates that the UK and the EU have agreed that, subject to the consent of the Efta States, the EEA Agreement will be operable/applicable post Brexit, even though the UK will be a member of neither the EU, nor EFTA.  That is, the asserted ‘necessary condition’ for EEA participation is a fiction: it is simply ignored in the draft Withdrawal Agreement and, if that Agreement is ratified and implemented, what was previously claimed to be impossible will come to pass.  Given that, when the time comes to consider Article 127 issues again it is unlikely that the avoidance strategy will be sustainable.

One ironic consequence of the avoidance strategy is the current negotiation around transition arrangements that will see the UK government responding to a referendum sentiment to ‘take back control’ by ceding yet greater control over its affairs to others.  This is now rationalised by those who have contributed most to bringing it about on a ‘paradise deferred’ argument (and deferred by only 21 months), but that looks for all the world like a doubling-down on wishful thinking.

Whether the withdrawal Agreement is or is not ratified, it will remain the case that there are only two, legitimate ways for the UK to withdraw from the EEA: (a) by the giving of Article 127 notice or (b) with the unanimous consent of all the contracting parties.  Given those routes to exit, the EU or any of the other contracting parties (each acting alone and whether an EU Member State or an Efta State) can block route (b).  The UK Government will not be able to just slink away from the EEAA.

The EU can, entirely reasonably, insist that the UK honour the international treaty obligations it freely accepted when it signed and ratified the EEAA twenty-five years ago, thereby blocking route (b).  Moreover, there are at least two good, immediate reasons for it to do just that: (i) maintenance of harmonised regulation on the two sides of the Irish border and (ii) money. It may also be relevant that a ‘strategy of insistence’ (that EEAA promises/ commitments be kept) would likely be aligned with the views of majorities both in Parliament and among the UK public. It would not be a case of EU vs UK, more a case of EU + UK (people and Parliament) majority opinion vs UK minority opinion.

The obvious strategy for the UK from the beginning was therefore for it to seek first to become designated as an EFTA State for EEAA purposes, with the full treaty rights and obligations of such States.  Compared with designation as an EU Member State with obligations, but without governance rights (the position contemplated by the draft Withdrawal Agreement), this would afford greater sovereignty and simultaneously resolve what are arguably the most difficult of the Irish border problems.

In summary, notwithstanding its relatively low profile in Brexit discourse to date, Article 127 of the EEA Agreement will continue to be a highly relevant factor in the Brexit process.  It is a high value card for whichever party holds it in their hand and is willing to use it.  The significance of 29th March 2018 is that it was the day that the card shifted from the UK Government’s hand to the EU’s hand.  Thanks largely to the recalcitrant unwillingness of ‘ultra Brexiteers’ to contemplate compromises with other strands of pro-Brexit opinion and with ‘softer’ Remainers, it may also come to be seen as the day on which the bell tolled for any prospect of a ‘hard’ or ‘clean’ Brexit, not only on 29th March 2019, but also on 31st December 2020.

In contrast, the bell has not yet tolled for an EEA/EFTA Brexit. Although it is getting awfully late in the day for that to happen on 29th March 2019, its prospects for the beginning of 2021 are, if anything, brightening.

More facts from Norway

Here is another update from Helle Hagenau of Norway’s Nei til EU campaign. Our Chairman clearly remembers Edward Heath telling a reporter in 1972 that Norway’s economy was in terrible trouble because of the referendum decision to stay out of the EU. He was speaking “from authority and the reporter accepted it. In those days there was no internet for instant rebuttal – only the newspapers and the BBC, which were all pro EU. Thankfully, now there are alternative media outlets – and this site seeks to be one – which can refute any nonsense told by our opponents.

No to EU in Norway is sending you another factsheet (attached).

This time it as about whether Norway needs the EEA agreement in order to sell our products to the EU and some of the quite outrageous statements from senior business and political leaders.

Please, feel free to distribute within you own network.

Here is a link to a web version. The full piece is set out below.

As a keen follower of the British debate I know you face some of the same scaremongering. Don’t give up! The Norwegian people won in 1994 and you can do it on 23rd June!!

 

Keep up the good work!

 

Yours sincerely

Helle Hagenau

 (Reminder: Helle will be one of the speakers at our annual rally on 14th May)

Do we need the EEA Agreement in order to sell our products to the EU?

The deafening message from the pro-EU side is that we must have the EEA Agreement to secure market access to the EU but we have heard this argument before.

Background

In the debate about alternatives to the EEA Agreement, claims are being put forward that Norway needs the agreement in order to sell its products to the EU. These claims are suspiciously similar to the warnings issued by the pro-EU side before the referendums on EU membership in 1972 and 1994. This scaremongering was proven wrong on both occasions.

Leading business figures, pro-EU politicians and the media, all with ready access to public platforms, continue to hammer away at the same message as in 1992: we must keep the EEA Agreement in order to have access to the EU market. The arguments put forward by the pro-EU side proved to be totally misleading in 1992 – and they are just as misleading today.

When Norway entered into the EEA Agreement in 1992, we had already had a free trade agreement with the EU for 19 years. This agreement meant that Norwegian industry, after a transitional period, did not have any tariffs on any of its exports to the EU.

The food industry was the one exception. There have been tariffs on agricultural products (because of Norwegian interests) and on processed fish products (because of EU interests). For all other industrial products and for all raw materials, there has been complete duty free access to the EU and there have not been any quota restrictions on trade with the EU.

Still, the deafening message is that we need the EEA Agreement in order to secure market access to the EU but we have heard all this before.

An echo of 1972

During the spring of 1972, the first debate on the trade agreement was raging. At that time, the EEC had for many years been levying duties on many of our most important export commodities, such as aluminium and other metals, paper and fish. The anti-EU side’s economists struggled to convince the public that the tariffs were much less of an obstacle to exports than the pro-EU side claimed.

At that time, help came from the outside. Unlike the United Kingdom, Ireland, Denmark and Norway, the EFTA states of Sweden, Finland and Austria had not applied for membership. Instead, during the winter of 1972, they had negotiated trade agreements with the EEC. These trade agreements removed what tariffs and other barriers to trade there were for trade in industrial goods between the EEC and these three EFTA states.

The People’s Movement against the EEC claimed that Norway could also negotiate such a trade agreement if the referendum on EEC membership in September 1972 were to result in a ‘no’ majority. This was stubbornly denied by the pro-EEC side, which used two types of arguments:

• Firstly, there was no reason to believe that the EEC would go along with a trade agreement with Norway.
• Secondly, there was certainly no reason to believe that we would get a deal that was as favourable for our export industries as the agreements Sweden, Finland and Austria had achieved.

In one export-dependent company after the other, the CEOs sent personal letters to all the employees stating that their jobs were in danger if there was a ‘no’ majority in the referendum.

Six days before the referendum, under the headline: ‘No petrochemical industry outside the European Community’, the CEO of Hydro, Johan B Holte, stated in a daily newspaper: ‘A trade agreement will be a hindrance’.1

 However, we now know the outcome. The majority of the electorate voted ‘no’ in the referendum on 25 September 1972. The Labour Party government resigned, and with astonishing speed, the new centrist government negotiated an agreement that was a carbon copy of the agreements that Sweden and Finland had signed.

Six months after the referendum, the atmosphere in Hydro had completely changed. In March 1973, a newspaper headline read: ‘Telemark embarks on the oil adventure with Hydro’s billion kroner plans at Rafnes.’2

The same Johan B Holte stated: ‘A new Hydro adventure is under way in Grenland. We are considering investing up to a billion in petrochemical industry at Rafnes.’ No journalist asked: ‘But didn’t you say six months ago that the trade agreement would make it impossible to develop a petrochemical industry in Norway?’

Scaremongering in 1994

Twenty-one years went by, and Hydro had a new CEO. On 26 September 1994 – two months before the second referendum – new CEO Erik Myklebust, stated: ‘Thousands of jobs will be lost in Norway and new investments worth billions will be made elsewhere. That is the difference for Norsk Hydro between a Norwegian no or yes to the EU. The EEA Agreement will be worth zero.’

During the autumn of 1994, there was really no limit to how bad things would be. The interest rate would rise, the krone would fall, exports would fail, capital would disappear and unemployment would increase.

• Unrealistic
Erik Tønseth, the CEO of Kvaerner, set the tone: ‘In practice, it is irrelevant whether Norway has an EEA Agreement or not. I simply think that the EEA has no basis in reality.’ 3

• Worthless
President Svein Aaser of the Norwegian CBI (NHO) followed up, ‘The EEA Agreement will be worthless if the rest of the Nordic countries join the EU without Norway. There is reason to believe that the EEA Agreement would then cease to function.’4

• Will crumble

Yngve Hågensen, leader of the Norwegian TUC, addressed a meeting of the Oslo Labour Party on 13

September 1995: ‘The TUC boss leaves no doubt, however, that he believes the EEA Agreement will crumble with only Norway and Iceland as EEA countries outside the EU.’5

• Not a single one

As usual, it was the prime minister who went furthest: ‘Around the country there are many who have investment plans ready if there is a yes vote. But I have not heard of a single company that has new investment plans ready if there were to be a ‘no’ in November.’6

• Something very wrong

Seven days before the referendum, then leader of the Labour Party Thorbjørn Jagland   warned: ‘Something very wrong can happen to Norway.’7

Things did  not really go that bad at all. In May 1995, a financial daily newspaper  documented over two pages ‘How the pro-EU side’s doomsday prophecies have been put to shame’ – ‘Everything has
gone better for the Norwegian economy since Norway said no to the EU on 28 November last year. Interest rates have fallen, growth has increased, the budget deficit has evaporated and investments are rocketing sky high.’8

No one on the anti-EU side had promised that industry would grow strongly if there was a no vote.

The ‘no’ message was consistently that the EEA Agreement would secure jobs in industry just as well as a membership in the EU would – and that the free trade agreement we had with the EU from 1974 to 1994 would have secured jobs in industry just as well as a membership of the EEA.

It was the pro-EU side, spearheaded by the Norwegian CBI (NHO) with the government tagging along behind, that predicted a dramatic downturn for the Norwegian economy. But it did not occur after 1972. Nor did it occur in 1994. Should we believe the scaremongering more this time around?

Notes

1) Stavanger Aftenblad 19.9.1972.
2) Varden 20.03.73.
3) Dagens Næringsliv 24.5.1994.
4) Dagens Næringsliv 25.5.1994.
5) Aftenposten 14.9.1995.
6) Gro Harlem Brundtland during the Parliamentary debate on EU membership 30.09.94.
7) Dagbladet 21.11.1994.
8) Dagens Næringsliv 22.5.1995

(This fact sheet was originally published in 2012, no. 2-2012. Translated 2016.)

Britain, do not listen to the scaremongering!

A statement from the Board of No to EU in Norway

From the campaign in 1994 to keep Norway out of EU, No to EU is familiar with the tactics the British people currently are experiencing.

No to EU is watching the debate in the UK with great interest. Whether the UK leaves the EU or remains in the union is entirely for the British people to decide. The EU Commission in Brussels must also respect this fact.

We know from our own experience the EU system and the government apparatus will do everything possible to inject fear into people about the consequences of leaving the EU.

The disaster stories of lost jobs and a plummeting pound if the UK would dare leave the union, sound desperately familiar to No to EU. Prior to the referenda on EU membership in Norway in 1972 and 1994, the Norwegian people were told the industry would flee the country and 100,000 jobs would be lost if we voted no to the EU.

The reality has turned out to be quite the opposite. Since 1994, the Norwegian economy has developed and grown much more than the economies in EU member states. Norway has full sovereignty in the agricultural and fishery sectors, and the management of the Norwegian fisheries has been a great success.

British EU supporters, with the help of the Norwegian government, present Norway’s association to the EU through the EEA Agreement as a disaster. The British government has repeated the myth that Norway must accept three-quarters of EU laws and regulations. The reality is that Norway has implemented less than 10 percent of the laws and regulations, which the EU has adopted in the period 2000-2013. In addition, the EEA Agreement has a clause enabling Norway to refuse the implementation of new EU rules, a right EU member states do not have.

The Norwegian Government claims the EEA Agreement is a poor model for the UK. On the other hand, it is not willing to look at alternatives to the EEA Agreement for Norway, or use the flexibility permitted by the refusal clause. No to EU wants to end this undemocratic paradox, by replacing the EEA Agreement with a modern trade agreement with EU.

From the beginning of No to EU’s history, our aim has been to safeguard our democracy, defend our sovereignty and our natural resources. Our stance is based on international solidarity with people, both in the EU and in developing countries. Outside the EU, Norway has an independent voice on the international scene.

A UK outside the EU will be an interesting partner for Norway in achieving a modern trade agreement with the EU, preferably through EFTA, where we have cooperated previously.

Some encouragement from Norway

Helle Hagenau, of Norway’s Nei til EU campaign, will be one of the speakers at our annual rally on Saturday May 14th. She has  sent us a brief letter of support along with two useful factsheets, which can be downloaded here and here. One addresses the misinformation about how much EFTA countries like Norway pay to access theEU and the other sets out clearly and accurately the advantages Norway and other EFTA countries enjoy over EU members. Both can be downloaded and circulated – in fact, please do so! The more misonformation we can counter, the better.

Here is her letter:-

Dear friends

No to EU in Norway is determined to assist in almost every way possible in your referendum campaign. From time to time, we pick up issues where Norway is mentioned and where the remain side got it completely wrong. In order to counter these claims, we intend to produce a number of fact sheets about Norway, the EEA agreement and the EU. The first two fact sheets are attached to this e-mail.

One is about The difference between EU membership and the EEA agreement” and the other deals with Norway’s financial contribution to the EU & EEA”. We hope you will find these sheets relevant and useful.

Keep up the good work!

On behalf of No to EU

 

Helle Hagenau

Head of International Affairs